A recent article from Inc.com contributor Geoffrey James, “Easy Trick to Avoid a Price War,” offers this simple tip for pricing: Instead of lowering your prices to become more competitive, turn your competitor’s lower price into a competitive disadvantage.

“It turns out that when two products are virtually identical, people will buy the one that costs less. However, if buyers are exposed to a third product that costs more than either of the original two, people will usually pick the mid-priced product rather than the cheapest one,” James writes.

So, instead of lowering the price to match or beat the competition, offer three versions of your service at different price tiers, with the lowest one matching your competitor’s price. The services don’t even have to be dramatically different as long as you label them appropriately – Silver, Gold and Platinum, James suggests. This way, when a customer mentions your competitor’s price, you point out that it’s the same as your Silver package. By doing so, you’ve positioned your competitor as the “cheapie alternative.” And the research shows that more often than not, the customer will opt for your Gold or even Platinum level.

Click here to read the entire article from Inc.com.